Increasingly, financial factors drive economic booms. When countries and people accumulate so much wealth and start looking for earning money on their accumulated wealth instead of on their labor, incomes earned on assets rise while labor income falls.
Accumulation of wealth takes a financial form, giving financial markets the upper hand and promoting them becomes a major force in the economy.
Governments increasingly give in to the demands of financial markets resulting in finance-based globalization that drives the world economy. We're going up and down with the financial bubbles and bust.
After every crisis, governments try to regulate the system so that it won't happen again. In this race between governments/regulations and finance markets, markets constantly win.
Current regulation on finance leaves a lot of room for innovation; gives them too much room and they doom us to bubble-bust cycles. Look at the history of booms and busts in the USA; Remember, USA regulated interest rates until the 1980s, when caps were removed. A negativist approach exists to financial regulation.
We left behind a lot of policies and measures that we used effectively in the past. As a result, finance takes up much more space today than ever.
Now the fashion is macroprudential, based on the same liberal philosophy of allowing space for financial markets and institutions for innovation. We should learn that innovations do not necessarily prove good for efficiency, stability, and growth.
Therefore we need a totally different approach to finance.
The reality of power in the United States means we cannot pass even the weakest regulation. This crisis is not big enough for a fundamental change in economies in the United States. If we don't do the right things, we will have bigger booms and busts until a total meltdown. What we have been observing is a sputtering of a failing engine.
Ordinary people, voters, will have to take our fate in our own hands. The elites of this world don't seem interested in making the necessary changes. There exist many rational policies we could follow that would mitigate the crisis, or at least would alleviate some of it.
I confess, I know absolutely nothing about cause and effect of markets. I just watch charts and see if I can figure out what is going on. In the early 1980s I noticed an earnings gap between income earned from accumulated wealth and income earned by labor. The gap spread slowly at first and now exponentially. Now, I could be wrong on how I see the market and many very loving family and friends have told me I am wrong. As of yet, no one has been able to convince me. Please show me where I am wrong, or pay attention to what is happening and if it helps you understand our tragic economic mess we exist in right now.